LendingTree, Inc 10-Q for FY2020 Q1

LendingTree, Inc. (TREE)

10-Q 2020-05-05 For: 2020-03-31

Added on April 06, 2026

About this 10-Q

LendingTree, Inc filed this 10-Q on May 5, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $283.08M; up 7.9% from $262.39M a year earlier
Diluted EPS: $1.02; compared with -$0.04 a year earlier

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Delaware		26-2414818
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	TREE	The Nasdaq Stock Market LLC



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



		Page Number
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 5.	Other Information	40
Item 6.	Exhibits	41



	Three Months Ended March 31,
	2020			2019
	(in thousands, except per share amounts)
Revenue	$	283,084		$	262,390
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	14,252			17,670
Selling and marketing expense	195,538			174,891
General and administrative expense	32,082			31,117
Product development	10,963			10,166
Depreciation	3,378			2,482
Amortization of intangibles	13,757			13,427
Change in fair value of contingent consideration	(8,122		)	14,592
Severance	158			54
Litigation settlements and contingencies	329			(207		)
Total costs and expenses	262,335			264,192
Operating income (loss)	20,749			(1,802		)
Other (expense) income, net:
Interest expense, net	(4,834		)	(5,468		)
Other income	—			68
Income (loss) before income taxes	15,915			(7,202		)
Income tax benefit	3,061			7,752
Net income from continuing operations	18,976			550
Loss from discontinued operations, net of tax	(4,575		)	(1,062		)
Net income (loss) and comprehensive income (loss)	$	14,401		$	(512	)

Weighted average shares outstanding:
Basic	12,957			12,718
Diluted	14,158			14,186
Income per share from continuing operations:
Basic	$	1.46		$	0.04
Diluted	$	1.34		$	0.04
Loss per share from discontinued operations:
Basic	$	(0.35	)	$	(0.08	)
Diluted	$	(0.32	)	$	(0.07	)
Net income (loss) per share:
Basic	$	1.11		$	(0.04	)
Diluted	$	1.02		$	(0.04	)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	March 31, 2020			December 31, 2019
	(in thousands, except par value and share amounts)
ASSETS:
Cash and cash equivalents	$	51,208		$	60,243
Restricted cash and cash equivalents	93			96
Accounts receivable (net of allowance of $2,021 and $1,466, respectively)	119,559			113,487
Prepaid and other current assets	17,375			15,516
Current assets of discontinued operations	84			84
Total current assets	188,319			189,426
Property and equipment (net of accumulated depreciation of $19,294 and $17,979, respectively)	31,473			31,363
Goodwill	420,139			420,139
Intangible assets, net	167,823			181,580
Deferred income tax assets	90,725			87,664
Equity investment (Note 7)	80,000			—
Other non-current assets	28,665			29,849
Non-current assets of discontinued operations	9,476			7,948
Total assets	$	1,016,620		$	947,969

LIABILITIES:
Revolving credit facility	$	130,000		$	75,000
Accounts payable, trade	6,056			2,873
Accrued expenses and other current liabilities	105,647			112,755
Current contingent consideration	14,183			9,028
Current liabilities of discontinued operations	36,400			31,050
Total current liabilities	292,286			230,706
Long-term debt	267,870			264,391
Non-current contingent consideration	8,159			24,436
Other non-current liabilities	24,748			26,110
Total liabilities	593,063			545,643
Commitments and contingencies (Note 14)
SHAREHOLDERS' EQUITY:
Preferred stock $.01 par value; 5,000,000 shares authorized; none issued or outstanding	—			—
Common stock $.01 par value; 50,000,000 shares authorized; 15,704,064 and 15,676,819 shares issued, respectively, and 13,062,746 and 13,035,501 shares outstanding, respectively	157			157
Additional paid-in capital	1,184,813			1,177,984
Accumulated deficit	(578,252		)	(592,654		)
Treasury stock; 2,641,318 shares	(183,161		)	(183,161		)
Total shareholders' equity	423,557			402,326
Total liabilities and shareholders' equity	$	1,016,620		$	947,969



				Common Stock									Treasury Stock
	Total			Number of Shares	Amount		Additional Paid-in Capital			Accumulated Deficit			Number of Shares	Amount
	(in thousands)
Balance as of December 31, 2019	$	402,326		15,677	$	157	$	1,177,984		$	(592,654	)	2,641	$	(183,161	)
Net income and comprehensive income	14,401			—	—		—			14,401			—	—
Non-cash compensation	11,917			—	—		11,917			—			—	—
Issuance of common stock for stock options, restricted stock awards and restricted stock units, net of withholding taxes	(5,087		)	27	—		(5,087		)	—			—	—
Other	—			—	—		(1		)	1			—	—
Balance as of March 31, 2020	$	423,557		15,704	$	157	$	1,184,813		$	(578,252	)	2,641	$	(183,161	)



	Cost		Accumulated Amortization			Net
Technology	$	116,200	$	(56,032	)	$	60,168
Customer lists	77,300		(13,979		)	63,321
Trademarks and tradenames	17,200		(7,292		)	9,908
Website content	51,000		(26,717		)	24,283
Other	5		(4		)	1
Balance at March 31, 2020	$	261,705	$	(104,024	)	$	157,681



	Amortization Expense
Remainder of current year	$	39,322
Year ending December 31, 2021	42,738
Year ending December 31, 2022	25,256
Year ending December 31, 2023	8,602
Year ending December 31, 2024	6,747
Thereafter	35,016
Total intangible assets with definite lives, net	$	157,681



	March 31, 2020		December 31, 2019
Accrued advertising expense	$	58,165	$	65,836
Accrued compensation and benefits	9,265		10,540
Accrued professional fees	3,315		1,560
Customer deposits and escrows	9,616		6,920
Contribution to LendingTree Foundation	3,333		3,333
Current lease liabilities	6,470		6,885
Other	15,483		17,681
Total accrued expenses and other current liabilities	$	105,647	$	112,755



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)
			(per option)		(in years)	(in thousands)
Options outstanding at January 1, 2020	777,871		$	69.87
Granted ^(b)	69,319		275.82
Exercised	(2,462	)	67.05
Forfeited	(193	)	332.65
Expired	(1,974	)	352.10
Options outstanding at March 31, 2020	842,561		86.11		4.54	$	99,017
Options exercisable at March 31, 2020	677,829		$	43.56	3.49	$	98,896


(b)	During the three months ended March 31, 2020, the Company granted stock options to certain employees with a weighted average grant date fair value per share of $138.29, calculated using the Black-Scholes option pricing model, which vesting periods include (a) three years from grant date and (b) four years from grant date.



Expected term ⁽¹⁾	6.00 - 6.25 years
Expected dividend ⁽²⁾	—
Expected volatility ⁽³⁾	52 - 53%
Risk-free interest rate ⁽⁴⁾	0.96%



	Three Months Ended March 31,
	2020		2019
Home	$	79,174	$	63,437
Credit cards	51,586		54,506
Personal loans	31,509		32,531
Other Consumer	36,829		33,692
Total Consumer	119,924		120,729
Insurance	82,737		67,092
Other	1,249		11,132
Total revenue	$	283,084	$	262,390



	Three Months Ended March 31,
	2020			2019
Balance, beginning of the period	$	1,466		$	1,143
Charges to earnings	880			510
Write-off of uncollectible accounts receivable	(332		)	(288		)
Recoveries collected	7			5
Balance, end of the period	$	2,021		$	1,370


(1)	The expected term of stock options granted was calculated using the "Simplified Method," which utilizes the midpoint between the weighted average time of vesting and the end of the contractual term. This method was utilized for the stock options due to a lack of historical exercise behavior by the Company's employees.


(2)	For all stock options granted in 2020, no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.


(3)	The expected volatility rate is based on the historical volatility of the Company's common stock.


(4)	The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.



	Number of Options with Market Conditions	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)
		(per option)		(in years)	(in thousands)
Options outstanding at January 1, 2020	463,440	$	204.31
Granted^(b)	19,126	275.82
Exercised	—	—
Forfeited	—	—
Expired	—	—
Options outstanding at March 31, 2020	482,566	207.14		7.52	$	—
Options exercisable at March 31, 2020	—	$	—	0.00	$	—



Expected term ⁽¹⁾	7.00 years
Expected dividend ⁽²⁾	—
Expected volatility ⁽³⁾	51%
Risk-free interest rate ⁽⁴⁾	1.03%


(1)	The expected term of stock options with a market condition granted was calculated using the midpoint between the time of vesting and the end of the contractual term.


(2)	For all stock options with a market condition granted in 2020, no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.



	RSUs
	Number of Units		Weighted Average Grant Date Fair Value
			(per unit)
Nonvested at January 1, 2020	144,939		$	267.85
Granted	97,375		276.84
Vested	(40,676	)	243.25
Forfeited	(4,181	)	265.80
Nonvested at March 31, 2020	197,457		$	277.42



	RSUs with Performance Conditions
	Number of Units	Weighted Average Grant Date Fair Value
		(per unit)
Nonvested at January 1, 2020	14,647	$	210.55
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at March 31, 2020	14,647	$	210.55



	RSAs with Performance Conditions
	Number of Awards		Weighted Average Grant Date Fair Value
			(per unit)
Nonvested at January 1, 2020	47,608		$	340.25
Granted	—		—
Vested	(5,951	)	340.25
Forfeited	—		—
Nonvested at March 31, 2020	41,657		$	340.25



	RSAs with Market Conditions
	Number of Awards	Weighted Average Grant Date Fair Value
		(per unit)
Nonvested at January 1, 2020	26,674	$	340.25
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at March 31, 2020	26,674	$	340.25


•	during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price (as defined in the Notes) per $1,000 principal amount of Notes for such trading day was less than 98% of the product of the last reported sale price of the Common Stock and the conversion rate on each such trading day; or


•	upon the occurrence of specified corporate events including but not limited to a fundamental change.



	March 31, 2020		December 31, 2019
Gross carrying amount	$	299,985	$	299,991
Unamortized debt discount	28,677		31,789
Debt issuance costs	3,438		3,811
Net carrying amount	$	267,870	$	264,391


•	a base rate generally defined as the sum of (i) the greater of (a) the prime rate of Truist Bank, (b) the federal funds effective rate plus 0.5% and (c) the LIBO rate (defined below) on a daily basis applicable for an interest period of one month plus 1.0% and (ii) an applicable percentage of 0.25% to 1.0% based on a total consolidated debt to EBITDA ratio; or


•	a LIBO rate generally defined as the sum of (i) the rate for Eurodollar deposits in the applicable currency and (ii) an applicable percentage of 1.25% to 2.0% based on a total consolidated debt to EBITDA ratio.



	Fair Value at March 31, 2020		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)^(a)
	(in thousands)
Contingent consideration	$	22,342	Option pricing model	Operating results growth rate	8.7% - 37.1% (22.9%)
				Customer growth rate	0.7	%
				Discount rate	10.3% - 10.5% (10.4%)
			Scenario approach based on interest rate forecasts^(b)	Date and likelihood of an increase in interest rates	—
				Discount rate	—	%



	Three Months Ended March 31, 2020
	Home		Consumer		Insurance		Other			Total
	(in thousands)
Revenue	$	79,174	$	119,924	$	82,737	$	1,249		$	283,084
Segment cost of revenue and marketing expense	43,263		76,825		52,204		1,577			173,869
Segment profit	35,911		43,099		30,533		(328		)	109,215
Cost of revenue (exclusive of cost of advertising re-sold to third parties included above)										13,166
Brand and other marketing expense										22,755
General and administrative expense										32,082
Product development										10,963
Depreciation										3,378
Amortization of intangibles										13,757
Change in fair value of contingent consideration										(8,122		)
Severance										158
Litigation settlements and contingencies										329
Operating income										20,749
Interest expense, net										(4,834		)
Other income										—
Income before income taxes and discontinued operations										$	15,915



	Three Months Ended March 31, 2019
	Home		Consumer		Insurance		Other		Total
	(in thousands)
Revenue	$	63,437	$	120,729	$	67,092	$	11,132	$	262,390
Segment cost of revenue and marketing expense	39,516		66,755		39,228		10,373		155,872
Segment profit	23,921		53,974		27,864		759		106,518
Cost of revenue (exclusive of cost of advertising re-sold to third parties included above)									10,334
Brand and other marketing expense									26,355
General and administrative expense									31,117
Product development									10,166
Depreciation									2,482
Amortization of intangibles									13,427
Change in fair value of contingent consideration									14,592
Severance									54
Litigation settlements and contingencies									(207		)
Operating loss									(1,802		)
Interest expense, net									(5,468		)
Other income									68
Loss before income taxes and discontinued operations									$	(7,202	)



	Three Months Ended March 31,
	2020			2019			$ Change			% Change
	(Dollars in thousands)
Home	$	79,174		$	63,437		$	15,737		25	%
Consumer	119,924			120,729			(805		)	(1	)%
Insurance	82,737			67,092			15,645			23	%
Other	1,249			11,132			(9,883		)	(89	)%
Revenue	283,084			262,390			20,694			8	%
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)	14,252			17,670			(3,418		)	(19	)%
Selling and marketing expense	195,538			174,891			20,647			12	%
General and administrative expense	32,082			31,117			965			3	%
Product development	10,963			10,166			797			8	%
Depreciation	3,378			2,482			896			36	%
Amortization of intangibles	13,757			13,427			330			2	%
Change in fair value of contingent consideration	(8,122		)	14,592			(22,714		)	(156	)%
Severance	158			54			104			193	%
Litigation settlements and contingencies	329			(207		)	536			259	%
Total costs and expenses	262,335			264,192			(1,857		)	(1	)%
Operating income (loss)	20,749			(1,802		)	22,551			1,251	%
Other (expense) income, net:
Interest expense, net	(4,834		)	(5,468		)	(634		)	(12	)%
Other income	—			68			68			100	%
Income (loss) before income taxes	15,915			(7,202		)	23,117			321	%
Income tax benefit	3,061			7,752			(4,691		)	(61	)%
Net income from continuing operations	18,976			550			18,426			3,350	%
Loss from discontinued operations, net of tax	(4,575		)	(1,062		)	3,513			331	%
Net income (loss) and comprehensive income (loss)	$	14,401		$	(512	)	$	14,913		2,913	%



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
					(in thousands)
1/1/2020 - 1/31/2020	409	$	307.15	—	$	179,673
2/1/2020 - 2/29/2020	14,733	$	334.04	—	$	179,673
3/1/2020 - 3/31/2020	751	$	272.46	—	$	179,673
Total	15,893	$	330.44	—	$	179,673